saudi business optimism index - الصفحة الرئيسية · there have been tentative signs...
TRANSCRIPT
Hydrocarbon Sector Non-Hydrocarbon Sector Sector Analysis Finance and Business
Appendix
Methodology
Composite BOI for the hydrocarbon sector gains 8 points to
stand at 39, up from 31 in Q2 2013
Although the Composite BOI for the non-hydrocarbon sec-
tor witnesses a cyclical decline of 6 points to 49 from 55 in
Q2 2013, yet Y-o-Y comparison reveals higher BOI levels in
Q3, 2013 when compared with the same period last year.
Majority of the respondents in the non-hydrocarbon sector
(61%) and hydrocarbon sector (67%) do not foresee any
negative factors which could impact business operations in
Q3 2013
Investment outlook of Saudi businesses remains steady
with a majority (51%) of respondents planning to invest in
business expansion.
Executive Summary
Saudi Business Optimism Index
3Q2013 Saudi Business Optimism Index (BOI)
Contents
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3Q 2013
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Prepared by: Said A. Al Shaikh
Group Chief Economist
Sharihan Al-Manzalawi
MIS/Finance Officer
THE NATIONAL COMMERCIAL BANK DUN & BRADSTREET SAME LTD.
demand for crude in key consuming countries. As well, stimulus measures announced by central banks, par-ticularly the Bank of Japan, have helped to lift the greenback, which weighs on commodities priced in US
Dollars. Meanwhile, inventories have been building for oil, suggesting that these markets are oversupplied.
After the significant decline of commodity prices in April, the momentum stabilised somewhat in May and June. There have been tentative signs that the slow-down in the global economy might have ended and that slightly higher growth could be expected in the
second half of this year. In 2012, the Kingdom pumped record levels of oil dur-ing the first half of the year to offset weaker output from sanction hit countries. Conversely during the sec-ond half of 2012 and mainly towards Q4, output
started to decline on account of higher supply from
North America and Iraq, coupled with a sluggish global demand. OPEC data shows that production declined from 9.76 million bpd in 2012 to 9.11 million bpd in Q1 2013. Production started increasing in Q2, rising to 9.31 million bpd in April 2013 and 9.66 million bpd in May 2013. Within the context of a slowdown in oil pro-
duction and stagnation in prices, the Kingdom’s real GDP is expected to slowdown in 2013 compared to 2012.
The BOI survey reveals an improved business outlook
for Saudi Arabia’s hydrocarbon sector in Q3 2013 com-pared with last quarter. All three parameters have reg-istered an uptrend. The BOI for the Net Profits parame-ter has jumped by 11 points to 48 from 37 in Q2 2013 as a majority (66%) of the businesses do not see any negative factors impacting businesses in Q3, which is a steep increase from the previous quarter’s tally of
48%. The hydrocarbon sector firms are optimistic about their selling prices as the BOI has gained 7
points to 30 from Q2’s level of 23. The index for the New Employees parameter has gained 6 points to 46 in Q3 from 40 in the previous quarter. 46% of the busi-ness units expect their sales volumes to increase in Q3
2013, 49% do not foresee any change whereas only 5% foresee a decline in Q3 2013. In terms of chal-lenges facing business operations in Q3 2013, avail-ability of skilled labour and government regulations are
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Hydrocarbon sector The IMF has cut its forecast for global growth due to a slowdown in the world’s emerging nations and poor
economic performance in the Euro zone. The IMF has reduced its projected growth for 2013 to 3.1%, from a
forecast of 3.3% in April, while the forecast for 2014 has been lowered to 3.8%, an amendment from its earlier prediction of 4%. The world economy remains in a three-speed mode with emerging markets still growing relatively rapidly compared to other parts of
the world, steady recovery in the US, but with much of Europe continuing to struggle. The US economy has undergone significant adjustment, with the combina-tion of a repaired financial system and revival in confi-dence driving growth. Private sector demand is stabi-lizing, house prices are rebounding and employment is
growing, adding to the confidence. Other major econo-
mies are lagging behind the US, however, which could limit the strength of global growth. The challenges are especially difficult in Europe, where growth is being held back by weak confidence, still rising unemploy-ment and continued banking sector and fiscal restruc-turing. Recession in the 17-country Euro zone has con-
tributed to the lack of demand, while the manufactur-ing PMI has been below the 50 mark dividing growth from contraction for 21 of the last 22 months. The divergence in growth paths between countries and
regions reflects the uneven progress made toward re-covery from the economic crisis. These multiple speeds
reflect different paths towards self-sustained growth, with each path carrying its own mix of risks. While high-income countries continue to face challenges, GDP growth in emerging and developing countries continues to remain firm with less volatile external conditions. The outlook for the global economy continues to be
surrounded by considerable uncertainty. Risk factors include the possibility of weaker than expected global demand, spill over from slow or insufficient implemen-tation of structural reforms in the Euro area, geopoliti-
cal issues and imbalances in major industrialized coun-tries.
The price of crude declined in Q2 2013 compared to Q1. The price of the OPEC basket averaged under US$ 101 per barrel in the second quarter compared to US$ 109.49 per barrel in the first quarter. The recent de-crease in oil prices was due to a combination of lower than expected demand prospects and seasonal factors, against a background of ample supply owing to the
increase in US shale oil production. Higher crude prices have made technologies economically viable and
spurred large increases in North American oil and natu-ral gas production and large increases in African oil production. Recent developments have also been influ-enced by the recovery of production in Middle East
countries such as Libya and Iraq. But demand suppres-sion has also been at work. Weak economic data out of China, the US and Europe have triggered renewed con-cerns surrounding global growth, and consequently,
down from 54 points in Q2 2013. The sector holds a positive outlook for selling prices even as the demand and new orders show weaker outlook remains uncer-tain. The Level of Selling Prices BOI has gained 8
points from 36 in Q2 2013 to stand at 44 in Q3.
Reflecting the cyclical downward trend in the current quarter BOI scores, only one (Transportation sector) among the five non-hydrocarbon sectors has witnessed an improvement in its optimism level. The construction
sector, which was the most optimistic in the previous quarter, has shown a decline in its composite BOI by 9 points along with the manufacturing sector index, which has also shed 9 points from the previous quar-ter’s level. The Trade & Hospitality and Finance & Busi-
ness Services sectors hold the least optimistic outlook for Q3 2013.
61% of the non-hydrocarbon sector respondents have said that they do not anticipate any negative factors to affect business operations in Q3 2013, a significant increase from the previous quarter’s 54%. Availability of skilled labour and delays due to government regula-
tions are cited as factors impacting businesses by 9% of the respondents in each category. 8% of the busi-ness units surveyed foresee competition as a challenge whereas 6% have indicated that low demand for their
products and services pose a challenge for their busi-ness operations in Q3 2013. 2% of the survey respon-dents foresee increasing cost of transport as a chal-
lenge. Availability of finance, availability of raw materi-als, increasing cost of labour and cost of raw materials are cited as business challenges in Q3 2013 by 1% of the respondents in each category. Investment plans have evinced a trend similar to the previous quarter, a majority (51%) of the respondents
plan to invest in business expansion in Q3 2012. 25% have said that they will not, while the remaining 24%
are unsure about expansionary activities in Q3 2013.
leading concerns for 15% and 10% of the sector re-spondents respectively. Low demand for goods & ser-vices and increasing labour cost are leading concern for 5% and 3% of the hydrocarbon sector respondents.
Non-Hydrocarbon sector
After a significantly strong growth in 2012 as a result of high government and consumer spending and pickup in oil output, Saudi Arabia’s GDP is expected to slow down to 4.4% (IMF estimate) in 2013 due to a
decline in oil output. The non-oil sector is forecasted to grow at a strong rate, supported by buoyant private non-oil activity, high oil revenues and corollary state spending as well as strong consumer spending growth. The government is continuing to invest in the infra-structure of the economy as well as education and
healthcare. High international oil prices, combined with
elevated oil production and surging petrochemicals and plastic exports are keeping the trade balance and cur-rent account in surplus. The current account balance is expected to stand at 19.2% of GDP in 2013. Saudi Arabia’s HSBC manufacturing PMI for the month of May pointed to a further strengthening of operating
conditions in the Kingdom’s non-oil producing private sector. The degree of improvement eased, however, and the headline index posted a six-month low of 57.3, down from April’s 58.0. The weaker growth rate was driven by generally slow market conditions.
Saudi Arabia’s non-hydrocarbon BOI score shows an upward trend, an improvement of 12 points, reaching 49 points on a Y-o-Y basis. On a quarterly basis, the BOI in Q3 has turned down moderately, due to cyclical decline, as most parameters have moved lower from their previous quarter’s levels. The composite BOI has
tipped lower by 6 points to stand at 49 in Q3. The BOI for the Volume of Sales and New Orders stand at 52
and 53 respectively, which are 13 and 9 points below the Q2 levels in the same order. The profitability out-look has moderated as well, the BOI score has de-clined by 5 points to 51 from 56 in Q2 2013. The Level
of Stock parameter stands at 45 in the current quarter, up from 34 in the previous quarter. The low demand and profitability scenario has dampened the hiring out-look; the BOI for Number of Employees stands at 47,
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nance as a challenge. 51% of businesses plan to invest in business expansion in Q3 2013. Only 24% have re-sponded that they do not plan to invest in business expansion, while 25% are undecided.
The Composite BOI score for the petrochemical manu-
facturing sector has jumped 25 points to 78 in Q3 from 53 in Q2 2013. The BOI for the Volume of Sales pa-rameter has risen to 89 in Q3 compared to 68 in the previous quarter, while the BOI for the New Orders parameter has gained 9 points to 86 from 77 in Q2.
The index of profitability outlook has witnessed a 38 point gain to 93 in Q3 2013 compared to 55 in the pre-vious quarter. Sales price expectations too have im-proved as the score for the Level of Selling Prices pa-rameter is at 57 in Q3 compared to 29 in Q2. The BOI for the Level of Stock parameter stands at 50 in Q3
compared to 35 in Q2. The Number of Employees pa-
rameter is recorded at 64 in Q3 2013 compared to 42 points in Q2.
67% of the petrochemical manufacturing sector re-spondents do not foresee any negative factors impact-ing their business operations in Q3 2013, a substantial increase from 42% in the previous quarter. Low de-
mand for products & services and increasing raw mate-rial costs each are a concern for 7% of the sector re-spondents, whereas 11% of the respondents are con-
cerned about availability of skilled labour. Increasing competition and availability of raw materials are identi-fied as key concerns by 4% of the respondents in each category. Only 50% of the sector respondents plan to invest in business expansion in Q3 compared to 61% in Q2 2013.
Non-petrochemical Manufacturing
The Composite BOI score for the non-petrochemical manufacturing sub sector stands at 41 compared to 53 in Q2 2013. The BOI for the Volume of Sales parame-
ter for this sector has dropped by 30 points to 44 in Q3 2013 compared to 74 in the previous quarter. The BOI for the New Orders parameter too has retreated by 28 points to 46 in Q3 2013 from 74 in Q2, whereas the
Sector Analysis Manufacturing sector
The JPMorgan Global Manufacturing PMI held steady at 50.6 in June, holding above the 50 mark that divides
growth and decline for the sixth month. However, the rate of growth signalled by the headline PMI remained only moderate and weaker (on average) over the sec-ond quarter of the year than during the first quarter. Solid rates of expansion were signalled by the PMIs for
the US, Japan, the UK, Russia, Switzerland and Mexico. Meanwhile, the downturn in the Euro zone continued to ease. China, Taiwan, South Korea and Vietnam also reported contractions during the latest survey period.
The BOI survey for Q3 2013 reveals that the manufac-
turing sector outlook has weakened compared to the previous quarter as the composite BOI shows a 9 points retreat from 58 in Q2. However, at 49 points the BOI score is 10 points higher when compared on a Y-o-Y basis. The quarterly decline is mainly on account of a drop in the sales and new orders outlook; the BOI for
the Volume of Sales parameter has slid 19 points to 54 in Q3 2012 from 73 in the previous quarter, while that for the New Orders parameter has dipped 20 points to 55 from 75 in Q2 2013. The BOI for Level of Selling
Prices has improved by 12 points to 39 in Q3 2013 from 27 in Q2, while the profitability index has moder-ated by 5 points to 50 in Q3 2013. Considering the re-
treat in sales, new orders and profitability in Q3 2013, the hiring outlook has also weakened. The BOI for the Number of Employees parameter stands at 47 in Q3 2013 compared to 60 in the previous quarter. The BOI for the Level of Stock parameter stands at 46 com-pared to 35 in Q2 2013.
A majority of the manufacturing respondents (62%) do not anticipate any negative factors to impact their
businesses, while 11% have cited availability of skilled labour as a challenge. Low demand for products & ser-vices and government regulations are each a leading concern for 6% of the respondents. 5% of the busi-
nesses expect competition to affect businesses the most. 4% of the businesses have highlighted cost of raw material as a major concern for their businesses. 2% of the respondents have polled availability of fi-
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On yearly basis, Construction sector optimism levels have increased by 12 points reaching a score of 56 points. However, quarterly optimism levels have wit-
nessed a slight decline in Q3 2013, the composite BOI
stands at 56 in Q3 2013 compared to 65 in Q2. All pa-rameters have recorded lower scores compared to Q2. The Level of Selling Prices BOI, which stands at 48 has weighed the least on the Composite BOI score. The BOIs for Volume of Sales and New Orders have de-clined 15 and 6 points, respectively to 60 and 61 from
75 and 67 in Q2 2013. A weaker selling price outlook coupled with uncertain demand has weighed on profit-ability expectations, the BOI for the Net Profits pa-rameter has dipped to 57 from 70 in Q2 2013. The Number of Employees BOI for Q3 2013 stands at 56
compared to 62 in Q2.
50% of construction businesses do not foresee any negative factors affecting business operations. 19% have indicated government regulations as a key chal-lenge, 14% foresee competition to impact business operations while 9% are concerned about availability of skilled labour. Demand for products & services and
cost of labour are a challenge to each by 3% of the construction sector respondents. 2% of the businesses are concerned about raw material costs in Q3 2013.
55% of the respondents plan to invest in business ex-pansion and 17% are undecided about the same for the current quarter. The balance 28% has stated that
they will not invest in business expansion in Q3 2013. Trade and Hospitality sector As developed markets face flat or anaemic growth, developing markets are sources of important growth for retailers. South and Latin America are significant
growth markets for retailers with seven countries (Brazil, Chile, Uruguay, Peru, Panama, Colombia and
Mexico) ranked in the 2013 A.T. Kearney Global Retail Development Index. Brazil tops the list thanks to con-tinued expansion investments, organic growth, infra-structure improvements in advance of the 2014 FIFA
World Cup and the 2016 Olympics, and a rise in con-sumer confidence. Sub-Saharan Africa is emerging as a market for regional and global wholesalers and re-tailers are seeking high-growth opportunities. The
index for profitability stands at 40 compared to 56 in Q2 2013. The Number of Employees parameter is re-corded at 42 compared to 64 in Q2, while the BOI score for the Level of Stock parameter stands at 43, 8
points higher that Q2’s score of 35. The selling price index has evinced an upward trend, where the BOI
stands at 35 points compared to 26 in Q2 2013.
A majority 60% of the respondents in this sub sector expect no impact from negative factors on their busi-ness in Q3 2013, compared to 54% in the previous quarter. 12% of the respondents have expressed con-cerns over availability of skilled labour, while 7% are
concerned about government regulations. Low demand for products & services and competition are a leading
concern for 5% each of the respondents. Availability of finance and increasing raw material costs are a con-cerning factor for 3% of the sector respondents in each category. 52% of the non-manufacturing petrochemical sector
respondents plan to invest in business expansion com-pared to 67% in the previous quarter. Construction sector
Restrained growth is forecast for the global construc-tion industry in 2013. The Asian construction markets
are expected to exhibit healthy construction spending growth in 2013. Japan is forecast to make significant increases in construction spending in the next three to five years, spurred on by the new Prime Minister and his pro-growth platform. China is experiencing slower growth since a great problem that is facing China is the housing and commercial office space bubble; there
are literally tens of thousands of empty homes and office facilities, waiting to find buyers. The European
sovereign debt crisis and the overall economic slow-down will continue to hinder the European construction sector in 2013. The construction industry in the US will benefit from the recovery process as well as the recent
major shale oil and gas discoveries.
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Wholesale & Retail Trade:
The Composite BOI for the wholesale & retail trade sub sector has inched higher by 2 points to 51 in Q3 com-pared to 49 in the previous quarter. The parameters in this sub sector show a mixed trend, the BOI for the
Volume of Sales parameter stands at 57 compared to 69 in Q2, whereas the New Orders parameter has gained 13 points to 54 from 41 in Q2 2013. Selling price expectations of the sector have improved as the parameter index is recorded at 48, 17 points above the
previous quarter’s score of 31. The index for profitabil-ity has moderated by 4 points to 57 from 61 in Q2
2013, whereas the Level of Stock parameter has gained 7 points to 49 from 42 in Q2 2013. The BOI for the Number of Employees stands at 40 compared to 42 in Q2 2013. A majority 62% of the sub-sector respondents do not
foresee any negative factors influencing business op-erations in Q3 2013, similar to the previous quarter’s score of 61%. 12% of the respondents foresee govern-ment regulations as a challenge facing their businesses
in Q3 2013, while 9% of the respondents are con-cerned about availability of skilled labour. Demand for products & services and competition are a major chal-
lenge for 7% each of the respondents in this sub-sector. Availability of raw materials, increasing cost of labour and high transportation costs are a key chal-lenge for 1% of the respondents in each category. 49% of the respondents in the wholesale & retail trade subsector plan investments in business expansion, up
from 28% in Q2 2013.
population is young and fast growing and GDP is grow-ing steadily as well. China remains one of the top mar-kets for retail with double-digit sales growth, rising consumer demand, and a dynamic retail environment.
The composite BOI for the trade & hospitality sector has moderated to 46 points in Q3 2013, albeit the score is significantly higher when compared on yearly basis (31 points in Q3, 2012). The quarterly decline is attributed to lower expectation of hospitality compa-
nies whereas trading companies hold steady optimism levels. The BOI for the Volume of Sales parameter has declined 15 points to 50 from 65 in Q2, whereas the New Orders BOI stands steady at the previous quar-ter’s level of 45. The Level of Selling Prices BOI has
gained 9 points to 46 from 37 in Q2 2013. The Net Profits BOI has retreated by 11 points to 49 from 60 in
the previous quarter. The sector’s hiring outlook too has moderated, the BOI for the Number of Employees parameter stands at 38 compared to 39 in Q2 2013. The BOI for the Level of Stock parameter has in-creased by 14 points to 46 from 32 in Q2 2013.
67% of the businesses in the trade & hospitality sector do not foresee any negative factors to impact business operations in the third quarter of 2013, which is higher than the previous quarter’s proportion of 59%. Gov-
ernment regulations is cited by 8% of the respondents, while high competition and low demand for products & services pose a challenge to 7% of the respondents in
each category. 6% of the trade & hospitality sector respondents are concerned about availability of skilled labour. 47% of the firms in the trade and hospitality sector plan to undertake business expansion in Q3 2013, a substantial increase from the previous quarter’s 31%.
25% are undecided on business expansion plans and 29% have indicated that they are not planning invest-
ment in Q3.
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capital rules. Soaring fuel costs, falling US crude oil imports and declining European demand have also added to pressures faced by ship owners.
The BOI for the transportation sector reveals an im-provement in the optimism level in Q3 2013 compared to the previous quarter while the optimism is signifi-cantly higher (up by 18points) when compared with the same period last year. The quarterly scores show
that this sector is also the most optimistic among all non-hydrocarbon sectors surveyed. The Composite BOI for the transportation sector stands at 57, which is 12 points higher than the previous quarter’s score of 45. The BOI for the Volume of Sales parameter has
gained 16 points to 64 in Q3 2013 from 48 in Q2. The BOI for the New Orders parameter stands at 60, 8
points above the Q2 2013 score of 52. The Level of Selling Prices parameter has also strengthened by 16 points to 53 from 37 in Q2 2013. Improved selling prices along with a strong sales and demand outlook have boosted profitability expectations of the sector, the BOI for the Net Profits parameter has soared by 18
points to 60 from 42 in Q2 2013. The sector’s hiring outlook too has improved; the Number of Employees BOI has climbed 4 points to 49 from 45 in Q2 2013.
68% of the businesses in this sector do not foresee any negative factors impacting their business opera-tions in Q3 2013, higher than the previous quarter’s
57%. 8% each have indicated availability of skilled labour and government regulations as chief concerns, while 4% have cited high transportation cost as a con-cern in Q3 2013. 6% of the transportation sector re-spondents are concerned about competition and low demand for goods & services in Q3 2013.
42% of the respondents said that they will invest in business expansion in the current quarter, 33% quoted
that they were unsure, while the remaining said that they will not.
Hospitality:
The Composite BOI for the hotels & restaurants sub sector has declined by 19 points to 31 from 50 in Q2 2013. The Volume of Sales BOI has shed 27 points to 30 in Q3 2013 from 57 in Q2 whereas that for the New Orders parameter has slipped 32 points from 54 in Q2 to 22 in Q3 2013. The BOI for Level of Selling Prices
has declined to 40 from 50 in Q2 2013. There is a down trend in the profitability index too, the BOI for the Net Profits parameter has slumped by 27 points to 30 from 57 in Q2 2013. The hiring outlook for the sub sector remains almost steady at the previous quarter’s
level, the BOI for the Number of Employees parameter stands at 33 compared to 31 in Q2 2013.
78% of the respondents have indicated that there are no negative factors affecting their businesses this quarter compared to 54% in Q2. Low demand for products & services and high competition each are a concern for 7% of the sector respondents whereas
availability of raw material and high labour cost each are a concern for 4% of the respondents in this sub sector.
48% of the respondents plan to invest in business ex-pansion in Q3 2013 compared to 38% in Q2.
Transportation Sector: Global trade growth has recently been broadly aligned with GDP growth, in contrast with the pre-crisis period in which trade grew more rapidly than GDP. In part this reflects natural disasters in Japan and elsewhere, and subdued capital investment. This is reflected in the
global transport industry. The global shipping slump is expected to last well into 2013 as a glut of vessels and
a growing credit squeeze will challenge even the toughest companies in the seaborne sector, according to Moody’s. Shipping companies, especially in the oil tanker and dry bulk sectors, already hit by worsening
economic turmoil, weak earnings and oversupply or-dered in the good times now face tighter financing as banks cut their exposure to risky and Dollar denomi-nated assets such as ship finance to meet tougher
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65% of the businesses in the finance & business ser-vices sector do not foresee any negative factors im-pacting business operations in Q3 2013, compared to
50% in Q2. Government regulations and competition are concerning factors for 8% of the respondents each,
while 7% of the respondents foresee availability of skilled labour as a challenge in Q3 2013. Low demand for products & services is a chief challenge for 6% of the respondents.
The sector is the most optimistic among all non-hydrocarbon sectors in terms of investment in business expansion. 56% of the sector respondents have said that they will invest in business expansion in the cur-rent quarter, 23% quoted that they will not, while the balance said that they were unsure.
Finance:
The Composite BOI for finance & insurance businesses
has gained 9 points to 64 in Q3 2013 from 55 in the previous quarter. The BOI for the Volume of Sales pa-rameter stands at 60 in Q3 compared to 62 in Q2 2013. The BOI for the New Orders parameter has de-
clined by 15 points to 60 in Q3 2013 from 75 in Q2, while that for Level of Selling Prices has moderated by 3 points to 60 in Q3 2013. The BOI for Net Profits and
Number of Employees are recorded at 60 and 80, re-spectively. 60% of the respondents in this sub sector do not fore-see any factors impacting their business operations negatively; the proportion is lower than the previous quarter’s tally of 75%. Low demand for products &
services and high competition each are a leading con-cern for 20% of the respondents. A majority (80%) are
planning investments in business expansion in Q3 2013 compared to 63% in Q2. Business Services:
The BOI for the business services sector is recorded at 45, down from 53 in Q2 2013. The BOI for the Volume of Sales parameter stands at 43 in Q3 2013 compared
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Finance & Business Services sector: Global financial and market conditions have improved appreciably in the past six months, providing additional
support to the economy and prompting a sharp rally in risk assets. These favourable conditions reflect a com-
bination of deeper policy commitments, renewed monetary stimulus, and continued liquidity support. Together, these actions have reduced tail risks, en-hanced confidence, and bolstered the economic out-look. Recently, the Federal Reserve Chairman said that
the US central bank could taper its monthly US$ 85 bn in asset purchases later this year if the economy con-tinues to improve as expected. Global shares slumped after the Federal Reserve signalled that it will stop pumping money into the world economy. However, an eventual fading out of QE in the US is on balance good
news, since it means that the Federal Reserve has con-
cluded that growth in the US, and the labour market performance, are strong enough to warrant a gradual return to normal monetary conditions. This should be good for the global economy and, eventually also for equity markets.
Overall business sentiments of the finance & business services sector indicate a less optimistic business out-look for Q3 2013, while the outlook remains better
when compared with the same period last year. The Composite BOI for the sector has dipped by 6 points to 46 from 52 in Q2 2013, however it is 10 points higher
in comparison with Q2, 2012. On a quarterly level, all parameters other than selling prices have registered a downward trend. The lower optimism for the sector is largely on account of reduced optimism among busi-ness services sector, while the finance sector optimism has witnessed an increase. The BOI for the Volume of Sales parameter stands at 43, 15 points lower than the
Q2 2013 score of 58, while the New Orders parameter has slipped to 52 points from 61 in Q2 2013. The busi-
ness units foresee an increase in their selling prices, the BOI has gained 4 points to 39 from 35 in Q2 2013. The uncertain demand outlook has slightly dented profitability expectations, the BOI for Net Profits stands
at 46 compared to 49 in Q2 2013. Businesses in the finance & business services sector have moderated their hiring outlook, the BOI is recorded at 50, down from 58 in Q2 2013.
skilled labour and delays due to government regula-tions are cited as factors impacting businesses by 9% of the respondents in each category. 8% of the busi-ness units surveyed foresee competition as a chal-
lenge, whereas 6% have indicated that low demand for their products and services pose a challenge for their
business operations in Q3 2013. 2% of the survey respondents foresee increasing cost of transport as a challenge. Availability of finance and raw materials, increasing cost of labour and cost of raw materials are cited as business challenges in Q3 2013 by 1% of the
respondents in each category.
67% of the hydrocarbon sector respondents have indi-cated that there are no negative factors impacting
their business operations in Q3 2013. Availability of skilled labour is cited as a chief concern by 15% of the
respondents, while 10% of the respondents are con-cerned about government regulations. Low demand for products and services and increasing cost of labour are a concern for 5% and 3% each of the sector respon-dents, respectively.
Investment plans:
Investment plans have evinced a trend similar to the previous quarter, a majority (51%) of the respondents
plan to invest in business expansion. 25% have said that they will not, while the remaining 24% are unsure about expansionary activities.
to 59 in Q2, logging a 16 points drop. The BOI for New Orders has declined 10 points to 51 from 61 in Q2. The profitability outlook too has dented slightly, the BOI for the Net Profits parameter stands at 46 compared to 52
in Q2. The Number of Employees parameter has slid to 49 from 61 in Q3 2013. The Level of Selling Prices pa-
rameter is the sole gaining index with a score of 38 in Q3 2013 compared to 33 in Q2.
63% of the businesses in the business services sector do not foresee any negative factors impacting business operations in Q3 2013, compared to 45% in Q2. Gov-ernment regulations is a concerning factor for 9% of
the respondents, while 8% of the respondents each foresee availability of skilled labour and rising competi-
tion as challenges in Q3 2013. Low demand for prod-ucts & services and rising transportation cost are key concerns for 6% and 4% of the sub sector respon-dents, respectively. 55% of the sector respondents said that they will in-
vest in business expansion in the current quarter, 23% quoted that they will not, while the balance said that they were unsure of expansion investment.
Business Challenges:
In the non-hydrocarbon sector, 61% of the respon-dents do not foresee any negative factors impacting their business operations in Q3 2013. Availability of
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44% of the respondents in the hydrocarbon sector plan investment in business expansion, 23% do not plan any investments, while 33% are unsure.
Appendix Hydrocarbon Sector
Volume of Sales The BOI for the Volume of Sales parameter has re-treated to 41 points in Q3 2013 from 57 in Q2. The respondents are divided in terms of their sales outlook
for Q3 2013; 49% do not foresee any change, 46% anticipate an increase, while only 5% expect a decline
in sales volumes. Level of Selling Prices
The BOI for selling prices has increased 7 points to 30 in Q3 2013 compared to 23 in the previous quarter. A
majority (64%) of the respondents do not foresee any change in selling price levels, 33% expect prices to increase, while 3% expect a decline in Q3 2013.
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Net Profits
The BOI for the Net Profits parameter stands at 48
compared to 37 in Q2 2013. 51% of the respondents foresee an increase in their net profits, while 46% of the respondents expect no change and the remaining 3% foresee a decrease in Q3 2013. Number of Employees
The BOI for the Number of Employees for the hydro-carbon sector has gained 6 points to 46 from 40 in the previous quarter. A majority 54% of the respondents
do not foresee any change, while the balance 46% an-ticipates an increase in employee numbers in Q3 2013.
Non-hydrocarbon Sector Volume of Sales
The BOI of the Volume of Sales parameter is down by 13 points to 52 in Q3 2013 from 65 in the previous quarter. A majority (65%) of the respondents antici-pate an increase in their sales volumes, 22% foresee
no change, while the remaining 13% expect sales to decline in Q3 2013.
New Orders
The BOI of the New Orders parameter stands at 53 in Q3 2013, which is 9 points lower than the previous
quarter’s score. A majority (62%) of the respondents anticipate an improvement in their order book status, 29% foresee no change, while the remaining 9% ex-pect new orders to decline in Q3 2013.
Level of Selling Prices
At 44, the BOI for Level of Selling Prices has gained 8 points from the previous quarter’s level of 36. The sec-tor respondents hold a diverse outlook in terms of sell-ing price expectations for Q3 2013; 48% of the re-spondents foresee an increase in selling prices in Q3 2012, while the same percentage do not anticipate any change and the remaining 4% of respondents foresee
a decrease in selling prices.
Net Profits The Net Profits BOI for the non-hydrocarbon sector has moderated 5 points to 51 from 56 in the previous
quarter. 64% of the respondents foresee an improve-ment in the profit levels, 24% expect no change while 12% anticipate a decrease.
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Number of Employees
The BOI for the Number of Employees parameter has
slipped by 7 points to 47 in Q3 2013 from 54 in Q2 2013. 52% of the respondents will up their head count, 43% said that they will maintain the level of employ-ment as that in the previous quarter, while 5% expect the headcount to decrease.
Level of Stock
The BOI of the Level of Stock parameter stands at 45,
11 points higher than the previous quarter’s level of
34. 49% of the respondents expect an increase in their
inventory levels, 47% foresee no change while 4%
foresee a decline in stock levels in Q3 2013.
Methodology
The D&B Business Optimism Index
The D&B Business Optimism Index is recognized as a
product that measures the pulse of the business com-
munity and serves as a reliable benchmark for inves-
tors. The D&B Business Optimism Index is arrived at
on the basis of a quarterly survey of business expecta-
tions. It is conducted in various countries that D&B
operates in. Over time, the quarterly survey has
emerged as a leading indicator of turning points in
economic activities in these countries.
A random sample is selected from Dun & Bradstreet’s
commercial database for conducting this survey. This
sample is divided into hydrocarbon and non-
hydrocarbon segments to eliminate the dominance of
the former over the latter and understand their dy-
namics individually. The hydrocarbon segment includes
Saudi Arabia’s mining, oil and gas companies whereas
the non-hydrocarbon segment encapsulates in its pur-
view the following sectors:
Manufacturing (140 units)
Construction (70 units)
Trade, restaurants & hotels (80 units)
Transport & communications (60 units)
Finance, insurance, real estate & business
services (110 units)
The sample is a microcosmic representation of Saudi
Arabia’s business community. The survey respondents
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are asked if they expect an increase, decrease or no
change regarding the following parameters: Volume of
Sales, Net Profits, Level of Selling Prices, New Orders
received, Level of Stock, and Number of Employees.
The individual indices for each of the above parameters
are then calculated by subtracting the percentage of
respondents expecting decrease from those expecting
increase.
Additional poll questions are asked relating to the cur-
rent economic scenario and are aimed at gauging the
business sentiments with regards to several key cur-
rent issues.
For the purpose of the survey, Q1 is the period be-
tween January and March, Q2 is the period between
April and June, Q3 is the period between July and Sep-
tember, and Q4 is the period between October and
December each year.
Composite Business Optimism Index
The purpose of the Composite Business Optimism In-
dex is to capture the aggregate weighted behavior of
all the six individual indices in the non-hydrocarbon
sector. Beginning in Q3 2010, D&B has further intro-
duced composite indices for all sub-sectors in the non-
hydrocarbon sector to allow one indicator to summa-
rize optimism levels in each of these sub-sectors.
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Disclaimer: The information and opinions in this research report were prepared by NCB’s Economics Department. The information herein is believed by NCB to be reliable and has been obtained from public sources believed to be reliable. However, NCB makes no representation as to the accuracy or completeness of such information. Opinions, estimates and projections in this report consti-tute the current judgment of the author/authors as of the date of this report. They do not necessarily reflect the opinions of NCB as to the subject matter thereof. This report is provided for general informational purposes only and is not to be construed as advice to investors or an offer to buy or sell or a solicitation of an offer to buy or sell any financial instruments or other securities or to partici-pate in any particular trading strategy in any jurisdiction or as an advertisement of any financial instruments or other securities. This report may not be reproduced, distributed or published by any person for any purpose without NCB’s prior written consent.
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Economics Department
Sharihan Al-Manzalawi
Financial Planning & Performance
The Economics Department Research Team
Head of Research
Said A. Al Shaikh, Ph.D
Group Chief Economist
Sector Analysis/Saudi Arabia
Albara’a Alwazir
Senior Economist
Macroeconomic Analysis
Majed A. Al-Ghalib
Senior Economist
Tamer El Zayat, Ph.D
Senior Economist/Editor
Management Information System
Shahrazad A. Faisal
Economist
Yasser Al-Dawood
Economist
Mai AlSwayan
Economist